The chairman of one of the UK’s leading steel glazing companies has said that government cutbacks to major capital projects have been implemented without sufficient regard for the construction industry’s contribution to the wider economy, with the private sector unable to bring forward new development projects that would play a significant role in bringing the UK out of recession.
Denis Wright of Devizes-based Wrightstyle Limited says this is underlined by the Office for National Statistics (ONS) which has just published construction figures for April 2012 showing a fall of 8.5% compared with April 2011. He has also called on the government to consider a cut in VAT for building and construction projects and review the scale of cuts in public sector building and infrastructure budgets.
According to Denis Wright, painful contractions in the building and construction sector are responsible for the country tipping back into recession. On top of job losses already experienced, some 45,000 construction workers are also expected to lose their jobs this year.
“The cuts have simply been too draconian, and the programme of developments set out in the National Infrastructure Plan don’t go far enough,” he said. “In addition, a cut in VAT for building and refurbishment projects would, as the National Federation of Builders has said, protect and create thousands of jobs.”
The downward trend in the sector may be further exacerbated by a decline in the value of office space – down 0.3% in the first three months of the year, according to the Investment Property Databank (IPD). “Although the value of detailed planning approvals has increased, we are concerned that developers, wary of stagnant or declining values, will simply postpone or cancel projects,” said Denis Wright.
He believes that government cuts, particularly in the health and education sectors, have significantly contributed to the construction sector’s 3%* fall this year, with the private sector unable to make good that decline – and further undermining Treasury plans for a return to sustainable growth.
“The building and construction sector is one of the key drivers within the economy and, while there are some green shoots visible, for example, a growth in commercial and hotel building approvals, particularly in the south east, and a significant increase in the underlying value of project starts, we remain concerned that the construction industry’s contribution to the economy is being undervalued,” said Denis Wright.
The company cites a recent report from CITB-Construction Skills that says that the construction industry will lose a further 45,000 jobs this year which could signal a "lost decade" for the sector.
“Some new build in the pipeline may simply be delayed or cancelled, particularly if commercial values remain depressed, and it is extremely worrying that the underlying value of all detailed planning approvals declined by 7% in the first quarter, largely because of public sector cutbacks - and the private sector simply can’t make good that funding gap,” he said.
A House of Commons report notes that in 2010, the Gross Value Added of the construction industry in the UK was £90.7 billion, 7.0% of total GVA. There were 2.07 million workforce jobs in the UK construction industry in September 2011, 6.6% of all workforce jobs.
A parliamentary Early Day Motion tabled earlier this year recognised “the need to retain skilled workers in the construction industry; and [called] on the Government to hold urgent talks with construction industry stakeholders to discuss the retention of skills in the sector.”
Wrightstyle recognizes that in a period of austerity, and with considerable turbulence in the eurozone, that public sector cuts in capital expenditure are both inevitable and necessary. However, they have been made “without due regard to the resilience of the construction industry and our shared ability to retain and grow a skilled workforce and deliver economic growth,” said Denis Wright.